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Harsh summer curbed sales of juices and beverages as consumers lapped up fizzy drinks

Additionally, a cola war triggered by recent entrant Campa Cola, helped the fizzy drinks segment, hurting beverage sales for Dabur, Tata Consumer Products Ltd and ITC Ltd.

Dabur India said Thursday that its sales of juice and nectar were impacted by the unusually intense summer. Nectar is a non-carbonated soft drink produced by mixing the flesh of fruits and diluting fruit juice added with water, sweeteners, additives and preservatives.

As consumers shifted to thirst-quenching options, demand for fizzy drinks increased, Dabur said. The company’s overall beverage revenue grew 2.8% in the June quarter. The beverage portfolio, under the Real brand, includes juices, fruit drinks, milkshakes, and carbonated beverages.

“In-home consumption stayed put while out-of-home consumption was impacted due to severe heat waves,” Vishal Punmiya, a lead analyst at Yes Securities, said in a note following Dabur’s quarterly earnings.

The quarter was marked by aggressive pricing by cola companies that prompted consumers to buy more carbonated drinks. Reliance Consumer revived the Campa Cola brand last year, marking its entry into the market for fizzy drinks.

Cola war

A cola war is under way in the country after a new player dropped prices by 50% to ₹10 for 200 ml packs. This led to two big players dropping prices, significantly widening the gap between nectar and cola prices, Punmiya said.

Cola is a ₹50,000 crore market and nectar is about ₹1,250 crore, he said. Growth in the nectar market is muted, but the company gained market share. Nectar represents 70-71% of total beverages for Dabur. The company is now ramping up capacities for fizzy drinks and coconut water, Punmiya said. 

Dabur’s carbonated fruit drinks portfolio grew 90%.

Packaged food and beverage company Tata Consumer Products Ltd said on Tuesday that the intense summer in many parts of the country impacted demand for hot beverages such as tea and other out-of-home categories. The company reported flat volumes in its tea business in the June quarter. 

“Packaged beverages saw another quarter of flat volumes and 1% revenue decline, with the tea business dented by intense summers. NourishCo too saw muted growth (up 6% versus 30% in FY24), as strong summers impacted out-of-home consumption for single-serve packs,” analysts at Jefferies said on the company’s earnings.

NourishCo has a portfolio of non-carbonated, ready-to-drink beverages such as Tata Gluco Plus, Himalayan Natural Mineral Water and Tata Water Plus.

ITC Ltd said extreme heatwaves adversely impacted categories with a higher salience of discretionary and out-of-home consumption. ITC announced its June quarter results Thursday evening.

India experienced severe heatwaves this summer, with temperatures soaring to 50 degrees Celsius in many regions. While such conditions typically boost sales of beverages, this time they led to a decline in outdoor activities and consumer spending on chips, juices, and candies — often purchased on impulse.

Consequently, demand for hot beverages decreased. However, fizzy drinks and bottled water stood out as categories that benefitted from the scorching summer. 

India reported 40,000 cases of suspected heatstroke and over 100 deaths till mid-June this year.

For the quarter ended 28 June, Coca-Cola said the India business led to a “big swing” in the beverage maker’s Asia-Pacific results. 

“Our business in India recovered nicely from a slower start to the year driven by Sprite and Fanta as well as strong local brands such as Thums Up and Maaza. Strong end-to-end execution across our growth flywheel led to double-digit volume growth,” James Quincey, chairman and chief executive officer of The Coca-Cola Company, said during its quarterly earnings call. The company is “very bullish” on India.

“Still very realistic in terms of it won’t be a straight line into the future, but they certainly had a good quarter in the second quarter,” he said.

 

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